How Will Brexit Affect Aircraft Parts?

Brexit is coming.  It is currently scheduled to happen at midnight on October 31 (European time).  November 1 is a Friday and it could represent a whole new slate of frustrations and issues for every industry – including the aircraft parts industry.

The UK is an important participant in the global aviation community so Brexit will affect the whole world.  Understanding what plans and standards have been put into place can help reduce the frustrations and facilitate both safety and compliance after Brexit.

Short History of Brexit

The United Kingdom joined the European Union on January 1, 1973.  44 years later, on March 29, 2017, Tim Barrow (the Permanent Representative of the United Kingdom to the European Union) delivered a letter invoking Article 50 to Donald Tusk, the President of the European Council.  The Article 50 deadline has been extended, and currently the United Kingdom is expected to leave the European Union at midnight on October 31, 2019.

Article 50 is the provision of the Treaty on the European Union that provides for exit from the European Union.

All of this is pretty well known to anyone who has followed any major news source over the past two years.  Yet, how this will all affect the aviation community remains less clear than we would like.

Options

The world has been anticipating two basic options for Brexit.

The first option, known as a “soft-Brexit,” is that the UK and the EU come to an agreement that allows them to have continued trade relations.  It has been widely anticipated that in the event of a soft-Brexit, UK CAA would join EASA as a third-party participant, much like Iceland, Liechtenstein, Norway and Switzerland (which are not EU member states but are EASA members).

The second option is known as a “hard-Brexit,” or a “no-deal Brexit.”  Under a hard Brexit, there would be no deal between the UK and the EU.  Politically, it is likely that EASA would be unable to extend to the UK an offer to join EASA as a non-EU member.  This would mean that the UK CAA would have to shoulder all of the airworthiness responsibilities for itself – they already handle many airworthiness duties but the additional duties undertaken by EASA would transfer back to the UK CAA.

The UK is in a fairly good position to support airworthiness.  UK CAA has continued to function for the UK by providing direct oversight in areas like production and maintenance.  UK CAA has already begun to increase its staff in anticipation of a hard Brexit.  UK CAA has also been hard-at-work establishing and updating bilateral aviation safety agreements with the UK’s major trading partners – these agreements will come into force immediately after Brexit.

One organization with which they have not formally negotiated is EASA.  The EU has taken the position that they cannot legally treat an EU member as a foreign entity, and thus they cannot negotiate international agreements like bilateral aviation safety agreements with a member state like the UK.  Despite this, the EU and EASA have issued regulations, and discussion papers explaining the position EASA intends to take in the event of a hard Brexit.  As discussed below, EASA and UK CAA have an excellent working relationship which should permit them to work well together when (and if) they are allowed to do so.

EU Position on Acceptance of UK Parts

The original April 2018 European Commission Notice to Stakeholders had painted a bleak picture of the near future between the UK CAA and EASA; it would have cancelled all UK approvals and it would have refused to recognize any UK-sourced EASA Form One after March 29.  The EU’s January 2019 updates to Brexit policy, though, have set much more reasonable short-term policies for the EU, and the subsequent March 2019 regulation has established a greater level of confidence that aviation will not come to a halt on November 1, 2019.

In essence, the EU intends to grant a nine-month grace period after Brexit.  This will permit the EU to continue negotiations with the UK; and it may allow the UK to join EASA as a non-EU member, or to otherwise establish a working arrangement with EASA.  Nine months is a short time period for negotiations and the UK CAA will be “under the gun” to achieve results during this time frame, but results to extend the UK CAA-EASA relationship are possible.

During the nine-month grace period, EASA will consider certain EASA design approvals issued to parties in the UK to remain valid.  This includes

  • Type certificates and restricted type certificates,
  • Approval of changes to type certificates and restricted type certificates,
  • Supplemental type certificates,
  • Approval in respect of repairs,
  • European Technical Standard Order authorizations,
  • Design organization approvals.

In addition, EASA will continue to recognize the validity of Authorized Release Certificates (EASA Form 1) for products, parts and appliances.  This includes the original certificates issued by the production organization, as well as maintenance certificates for articles that have already been installed in aircraft as of the Brexit date.  Unlike the nine-month recognition of design approvals, this recognition does not have a time limit.  This means that EASA will continue to recognize articles tagged in the UK before Brexit as valid articles.

But let’s look at some of the details in this pronouncement, because there are problems.  The regulation is ‘triggered’ by Brexit and enters into force on the following day.  The new regulation specifies that EASA will continue to recognize the validity of Authorized Release Certificates (EASA Form 1) that were valid as of the day before the regulation becomes active.  This means that an EASA Form 1 that existed on October 31 (assuming that is the day of Brexit) will continue to be valid on November 1.  But an EASA Form 1 issued on Monday November 4 will not be valid because it was not valid on October 31.

Where is the problem?  EASA will consider UK type certificates, STCs and ETSOAs to remain valid for nine months, but all UK production organization approvals (POAs) are considered invalid on November 1 (remember, EASA has offered to issue third country POAs to manufacturers in the UK).  This means that UK Form 1 (or other-named-forms) issued by UK manufacturers after October 31 will likewise remain invalid.  After decades of hearing requests for “fresh tags,” we may find ourselves preferring “stale tags,” because a Form 1 issued on or before October 31 by a UK manufacturer will be acceptable in the EASA system, while a Form 1 issued on or after November 1 by a UK manufacturer may not be acceptable in the EASA system.

Practice Tip: Because EASA Form 1 issued after October 31 may be invalid for EU-registered aircraft, companies who rely on parts produced in the UK, or parts overhauled/repaired in the UK, should ensure that the UK EASA Form 1 tags are dated by or before October 31, 2019.

What other problems are on the horizon?  Plenty of detail problems will be arising after October 31.  For example, the US-UK agreement will permit UK-produced articles to continue to be installed in US-registered aircraft, but US-based repair stations will have to be careful to check the date on the EASA Form 1!  While dates likely won’t matter for US-registered aircraft and US customers, EU-registered aircraft and EU customers may be unable to accept UK-sourced tags that were issued after Brexit.

Practice Tip: US repair stations with an inventory of articles with EASA Form 1 issued before October 31 should consider saving those articles for use on EU-registered aircraft and for EU-clients.  To facilitate this, use articles with UK CAA tags dated after October 31, 2019 on US-registered aircraft.

Practice Tip: Distributors should train their receiving inspectors to look carefully at the tags for articles produced in the UK.  The source of the POA (UK vs. EASA) and the date of the tag will influence who is permitted to use the article.

UK CAA Prepares

The UK CAA hasn’t been sitting idle.  Richard Moriarty reached out to EASA in a letter on June 1, 2018 to propose formal technical discussions to lay the groundwork for future cooperation.  The stressed the importance of clarity for the benefit of the regulated industry.  In a July 18, 2018 response, EASA Executive Director Patrick Ky made it clear that EASA would not be able to discuss practical cooperation with the UK CAA until after the specifics of the UK withdrawal had become clear and certain.  Over a year later, today, that certainty remains elusive.  While formal technical negotiations have not yet begun, UK CAA remains a member of EASA, and so there are normal channels of discussion about business matters that will likely help smooth the way toward an agreement between UK CAA and EASA (if an agreement is warranted).

As an example of the trust between the two organizations, EASA has offered to issue third-country certificates, like repair station certificates and production organization authorizations, to UK businesses.  The certificates would be issued immediately after Brexit (as soon as the UK becomes a “third-country” relative to the EU) in order to support safety and business continuity.  To allow the certificates to be issued immediately after Brexit, EASA needs to assess the applicants before Brexit.  EASA has made it clear that it is relying on the UK CAA to perform those assessments as the EASA technical agent.

UK and the US

UK CAA has been working closely with the US FAA on planning.  They have negotiated two different agreements – one that assumes a hard Brexit and one that assumes a soft Brexit.  Whichever one is appropriate will be signed immediately upon the occurrence of Brexit, in order to support continued, smooth, support of airworthiness between the UK and the US.

The US-UK agreement will be practically identical to the existing US-EU agreement,  The reason for this is to keep transactions smooth, under a set of transactional rules that all parties recognize.  So this means “business as usual” between the UK and the US.

While there may be minor issues that arise, the basic transactional model is expected to be solid between the UK and US.  This means that UK’s EASA Form 1 will likely continue to be valid in the US, and the future UK CAA Form 1 is also expected to be valid in the US after Brexit.  There are a substantial number of FAA 145 certificates in the UK.  Based on this, the US has discussed permitting UK-based companies with both a US 145 and a UK 145 certificate to issue the FAA 8130-3 as their maintenance release document for component-level work.  This allows the repair stations to use a globally-recognized tag, rather than having to educate the industry about a new UK-specific maintenance release document.

UK CAA has also been modifying its internal structures to support all of the elements that EASA has addressed over the past 16 years.  We expect them to be ready for Brexit.  We also expect this UK CAA staff to be overwhelmed with industry issues after Brexit, despite their best efforts to prepare.  The reason for this is because there are always details that fall under the radar during negotiations.

Politics in the UK and Brexit

There are a number of Brexit options lying in front of the UK.

It is looking increasingly likely that the UK will move into a hard Brexit.  The British press has reported that Boris Johnson has no intention of renegotiating the withdrawal agreement proposed by the EU and rejected by the UK.  This is partly because he has established – as a precondition to further UK-EU negotiations – that the EU must agree to withdraw the Irish backstop (and this is something the EU is unwilling to surrender).  The British press has also reported that a hard Brexit is Johnson’s “central scenario.”  It is clear that if Brexit does not happen on October 31 (in some form), then Johnson will be seen as reneging on his promises.

Despite the evidence favoring Johnson’s “central scenario,” a hard Brexit is not the only option.  Member of Parliament have discussed a no-confidence vote for Johnson as an early order of business upon their return in September in order to thwart the hard Brexit.  The Guardian newspaper has suggested that revocation of the Article 50 declaration is the only way forward for the UK (this would keep the UK in the EU).

But the Johnson camp has plans of their own: in the event of a no-confidence vote, one option would be to schedule elections for November (after Brexit happens) so that the new government would be too late to stop a hard Brexit.  Another option being discussed is proroguing Parliament.  Prorogation is the formal end of a parliamentary session and it is normally invoked through an announcement by the Queen.  When Parliament is prorogued, that ends the life of all incomplete motions and bills (although they can be introduced again in the next session).  Boris Johnson could ask the Queen to prorogue Parliament in an effort to prevent Parliament from interfering with the hard Brexit on October 31.  Although the Queen is legally permitted to act contrary to ministerial advice, she historically has not done so.

A hard Brexit is not a certainty; but it is a likelihood that must be considered as a reasonable possibility by aviation companies establishing their business plans vis-à-vis their UK business partners.

Expect Problems, But Work With Us On Solutions

Even in relationships specifically designed to weather Brexit, like the US-UK relationship, we will be facing new agreements that must be squared with a global market.  This means that there will be problems that arise where business models do not match the expectations of regulators who negotiated the agreements.  As you encounter these issues, please be sure to reach out to ASA so we can work with regulators to address and resolve these concerns.

 

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About Jason Dickstein
Mr. Dickstein is the President of the Washington Aviation Group, a Washington, DC-based aviation law firm. Since 1992, he has represented aviation trade associations and businesses that include aircraft and aircraft parts manufacturers, distributors, and repair stations, as well as both commercial and private operators.

One Response to How Will Brexit Affect Aircraft Parts?

  1. Pingback: Brexit Update – September 3, 2019 | ASA Web Log

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